India Inc sees employees login to early pay options

India Inc is increasingly tying up with fintech platforms to help employees tide over month-end cash crunch. The partnership allows blue-collar and contract employees to receive emergency cash without having to join a rival, or make a number of changes that impair productivity, or abscond after accepting cash-on-delivery from customers. .

“Customers have told us that there has been a 50% drop in churn due to access to early loans,” said Rohit Rathi, co-founder and CEO, KarmaLife. The fintech firm said that most of the lending happens during the 20th-25th. month, and on Mondays and Tuesdays.

The average credits received by over 200,000 users of KarmaLife is 8,000-10,000. Without access to such credit, more than 40 of its customers, including Zomato, Uber, Flipkart, Loadshare and Elasticrun, had noted that employees were taking up multiple jobs to cope with financial stress. Their login hours were reduced and in some cases, they had absconded from paying customers for cash-on-delivery purchases.

The tie-up between companies and fintech firms has led to a growing demand for contract workers. According to a Monday report by recruitment firm TeamLease Services, the number of contract workers has increased by 21% to 180,000 in the past 12 months. In the festive season starting from August to January, manufacturing, retail, logistics and delivery chains will be looking for contract workforce to boost sales.

While fintech analysts said the segment is small and has the potential to grow, its main constraints include rising defaulters and funding, two years after the pandemic. “These companies have market potential to grow, but they have seen crime during Covid, and are now tightening their filters as to who gets credit. Digital unsecured loans are less than market size 50,000 crore in India, which is still small,” said Prakash Agarwal, head of financial institutions, India Ratings. “Financing is a challenge for these firms and those with deep pockets have a greater chance of survival.”

KarmaLife has raised $3.5 million to date, of which $2.2 million was raised in February from Earth Ventures, Netgraph Investments, LV Angel Fund, Singularity Ventures and a group of angel investors. Rival Refines is backed by global investors such as Tiger Global, QED Investors, ICICI Bank, Aara VC, DST Global, RTP Global and XYZ Capital.

Refyne claims to have over 200 clients, including Rebel Foods, Acko, Practo, Car Dekho and Cloudnine Hospitals. Pushkina Nautiyal, Chief Marketing Officer, Refine said, “There was a huge demand for liquidity and there has been a 6-fold increase in transactions on a month-on-month basis.”

Nautiyal said that its clients have seen 65% of their employees sign up and around 35% of their employees transacting on the platform in the first 3-4 months of rolling out the services at the client firm. transaction amount is 1,800-2,000 and are often used by migrant workers who are moving to big cities and need to send money back to their homes.

Typically, fintech firms tie up with non-banking financial companies and then tie up with corporates requiring a large number of gig or contract workers. There are different forms of repayment. In most cases, the employee pays a convenience fee per transaction. The credit amount is settled against the salary payment at the end of the month.

According to a 2021 report by Refyne and consulting firm EY, up to 20% of employee turnover can be attributed to financial stress. “When this stress is carried over into the work environment, it manifests in the form of distraction, absenteeism, low performance and ultimately employee turnover,” the report said. The report, Earned Wage Access in India, states that around 42% of employees expect employers to help them. in ensuring financial well-being.

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